The UK competition regulator is expected to block Meta’s acquisition of online gif platform Giphy in the coming days in an escalation of the regulator’s attack on Big Tech.
The Competition and Markets Authority is set to reverse the deal according to people close to the matter, in what may be the first time the CMA has broken a major tech deal.
The watchdog began investigating Meta’s acquisition of New York-based Giphy – the largest provider of gifs for social networks – in June of last year. The decision to block the deal would set an eye-catching precedent for the UK regulator, which has never sought to reverse a completed tech deal.
The Capital Markets Authority declined to comment.
In August, the CMA provisionally ruled that Meta, formerly known as Facebook, should be forced to sell Giphy due to competition concerns. She has until December 1st to make a final call.
At the time, the CMA argued that Meta could cut off competitors’ access to gifs, and platforms like TikTok or Snapchat would require more of their data to be handed over in order to access gifs, bolstering power in Meta’s hands.
The agency also said the deal could remove a competitor to Meta in the UK display advertising market, despite Giphy’s lack of presence in that segment.
Facebook controls 40 to 50 per cent of the display ad market in the UK according to the CMA. Giphy offered paid advertising in the US and the CMA argued that in the absence of the merger, Giphy could have gone ahead with expanding the service in the UK – something the company has denied.
Meta has fiercely fought the watchdog’s assessment and the block is likely to be controversial, likely to lead to an appeal. In response to the CMA’s interim findings, Meta accused the watchdog of “engaging in extraterritoriality” and “sending a chilling message to budding entrepreneurs: Don’t build new businesses because you won’t be able to sell them.”
In August Meta said: “We do not agree with the CMA’s preliminary findings, which we do not believe are supported by evidence. As we have made clear, this merger is in the best interest of people and companies in the UK – and around the world – who use Giphy and our services. We will continue to work with the authority. public money market to address the misconception that a transaction is detrimental to competition.”
According to reports provided by Meta’s attorneys, the CMA findings included “material errors of law and fact.” The company also criticized the regulator’s assessment of Giphy’s potential future commercial ventures in displaying advertisements. It’s likely that Giphy will “continue in a shrinking and underfunded state,” Meta said.
Meta declined to comment on the CMA’s future move beyond its previous statements.
The clash intensified in October when the CMA fined Meta £50.5m for a “substantial breach” of an order that the company remain separate from Giphy during the investigation. The CMA accused Meta of “willingly refusing to report” information about herself and Givi, and delivered by far the largest fine ever for such a breach.
Regulators around the world are becoming increasingly concerned about allowing so-called “killer takeovers” to slip through their net, after brandishing Meta’s takeover of smaller rivals on Instagram and WhatsApp.
In Brussels, EU officials are looking for new ways to screen mergers that fall outside their scope on revenue alone. The British regulator also hopes to tackle potential killer acquisitions as part of Big Tech’s proposed special merger scheme.